Prime real estate markets yet to recover from foreign-buyer tax

Real estate market yet to recover

The three most popular markets for foreign buyers have failed to recover a year after Canada’s first foreign-homebuyer tax was introduced. The introduction of the tax has brought Metro Vancouver sales down 44%. These three include West Vancouver, Richmond and Vancouver’s west side where sales have dropped steeply. These areas had the highest number of foreign real estate buyers but sales were down significantly since the 15% tax came into effect last year.

House prices in West Vancouver and Richmond are lower than the price a year ago, while Vancouver’s west side has seen flat house prices, according to recent Real Estate Board of Greater Vancouver data. There has been drop in the number of detached houses that were sold in August, with 52 detached houses being sold this August, whereas a total of 72 houses were sold during the same month of last year. Moreover, there has been biggest drop in benchmark house prices in the Metro Vancouver region. The benchmark house prices have fallen by 6.3% and the fall in price is even more visible at the high end of the market.

A reality expert said that the price reduction have been between 20% and 30%. He said that foreign buyers today immediately discount any asking price by 15% to compensate for the tax “and then begin negotiations downward.” He cited a view-property house on Russet Way in West Vancouver that was sold for $2.8 million after four reductions, down from its listing price of $4.6 million. The expert termed the market extremely sluggish.

According to provincial government studies, the August benchmark price of a detached house in Richmond was down 0.9% from a year earlier. Prior to the foreign-homebuyer tax, foreign buyers accounted for 10% of housing sales in Richmond. The sale of detached houses in Richmond has come down to 959 houses, a fall of 31%. The benchmark price for a Richmond house in August has come down from $1.7 million in August 2016 to $1.57 million during the same period this year.

On Vancouver’s west side, detached-housing sales so far this year are down 42% from the same period in 2016 and, as of August, the benchmark house price had been shaved by an average of $135,000 to $3.5 million. Neil Hamilton, a senior property adviser with Macdonald Realty Ltd., said mainland Chinese buyers had been one of the major forces driving the west-side property market in the recent past.

“Recently the Chinese government has been diligently attempting to limit the flight of capital out of [its] country. So the higher-priced Vancouver west-side markets have been experiencing a downturn in activity as a result.”

He added that the temporary downturn offers a solid buying opportunity. He claimed a very strong spring 2018 market.

However, Eilers does not agree. “It is a hell of a lot better time to buy now than last year,” he said, but he suspects that prices for higher-end houses will continue to decline. “Eventually, sellers have to adjust their price.”

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